Know-How Exchange : Career/Training

Far too many salespeople are short sighted to the point where they not only lose the war, but they manage to destroy their own attitude in the process.

Here is the basic proposition. How much will you pay me to make you a millionaire. The value goes down the closer to the million dollars you get.

I would present the situation to the owner. We are together on the cusp of some really big deals. I want to see your investment grow dramatically, but I also would like to plan the next move.

A big part of my practice involves working through just this type of situation with distributors, systems integrators and other small companies. We should speak together off line.

Is she your wife?

If not, start talking now and get it in writing or your extra pay will go toward the salaries of new people...who you will be training for no additional pay...and will leave and new ones will be hired who you will train....

get it?

Michael

Ingrid,

I would strongly suggest getting clarity around your compensation in writing. Given the projected growth and your responsibilities at the company, it should be received as a reasonable request by the owner. "Trust" is vitally important in business, but it can rapidly dissipate when large sums of money are on the table. If you need advice on the negotiation, you might contact Kevin Conklin at BayGroup International (kevin@baygroup.com). They specialize in negotiation.

All the best with this exciting turn of events!

Tim

Get it in writing. That is to both of your benefits - clarifying your compensation, and clarifying the "worth" of their goals.

Dear Ingrid_atlanta

In theory, a company owner who believes in the profit principal would not have a problem paying you via a bonus such that your income exceeds theirs. After all, you will have substantially increased the value of their company and until they reinvest the profits, you will have generated some healthy bottom line figures. In about 1973, Lord Weinstock, when he was managing director of GEC in the UK was asked what he thought of one of their computer salesmen earning about £87,000 through his salary and bonus payments. He replied that he wished that all his salesmen would earn £87,000 a year or more. Later, in an aside to a newspaper journalist, he allegedly said, “That idiot of a reporter never asked me about my dividends and the value of my shares”

In practice though, most MD’s or CEO’s have a big psychological problem with anyone under them in the hierarchy receiving more money or a better car. I annoyed one such MD in the 1990’s by turning up to work when I didn’t need my boring old company car in a Ferrari. I think that I lasted about another month – he took to hating me because of envy. On the other hand, in another company whilst I was a salesman, we operated a two tier bonus structure (3 tiers actually if you take into account a big fat “Zero” if you came in under target. You get fired. At 80% of target we got 7.0% of turnover on top of our salary (In 1983 this was £6,500, which was quite a good basis as I lived in an inexpensive part of Scotland) My target then was £130,000 a year.

100% of target yielded another £3,500 on a linear sliding scale. It was what happened after I hit target (It was paid monthly in those days as we were expected to close deals within a few days) which really got interesting. The gross margin on the products was about 70% on top of the ex-factory price and an on-target performance by all sales people meant that the company had met all it’s financial targets That’s target profit, target turnover, target dividend for shareholders and target cash in the bank As a consequence the company could afford to pay up to 70% in over target performance without losing money, though that would be very diluting for the profit expressed as a % of turnover.

So they offered us 22.5% for all sales in excess of the individual target, adjusted for any discounting to discourage the practice!)

I shocked them a little by hitting my nearly target in November so anything which I earned in excess of this earned me a 22.5% of the excess. To their surprise and delight, I landed another £60,000 order which earned me £13,000 for December alone! For comparison, in those days you could buy a second hand Ferrari for £4000, so I headed for the car showrooms. Our owner, MD and Sales Director didn’t give a hoot because my performance and that of everyone else who was above target put money into the dividend payments and money into the director’s bonus pot. My success resulted in the company adding £32,550 to their profits.

Unfortunately such companies are few and far between, but do note that they key to the above figures is that there was enough margin on sales to spread it around a bit once all targets had been met.

That is what I think you should sit down and talk about with your CEO about. A commission based on turnover up to and including target is fair on gross sales value (If the company has done it’s margin calculations properly) and then to be paid further enhanced bonus on the profit from sales over and above the target value.

You need to sit down and work out some acceptable figures – for example if your net margin of your mega-sales is low, the company cannot necessarily afford to pay you at 10%-12% of a large headline figure, but it could pay you a percentage of the additional profit. From the figures you have given I cannot tell you what this % could be, but working it out is trivial. If your products have a hefty margin, then there is no reason why you cannot get even more than 10%-12% on deals over target.

The solution is in your hands. Get the figures and do the calculations and agree your remuneration and clearly stat what the company will receive as a consequences of all your hard work. As long as the company earns more than you do on this additional business, the only reasons for objecting to your hefty remuneration are arrogance and pride!


Best wishes

Steve Alker
Xspirt

A great deal depends upon the product you are selling and how much margin there is in it.

As turnover increases, so too does overhead.

Customer service costs, accounting and collection costs, manufacture, delivery and distribution costs.

Many small companies are happy to pay 10 -12% commission at the start considering that they don't have much capital to pay a solid salary but as things move forward, then it will be tough for the company to maintain this level of commissions as margins shrink.

As your responsibilities increase, you will have less time for selling also so your ability to produce comission for yourself will be curtailed. Therefore, you need to have a better fixed income plus commission/bonusses.

If you are training and managing sales people, then you should have a small overide on their performance also.

I suggest that you put together a complete package of salaries, bonusses and connissions based on a totla commission payout of 10% for ALL sales (meaning all sales people) agree on a level of commission for the primary seller, another level for the sales manage and another for the sales director (6% 3% 1%) for instance).

As sales director, you have a much bigger fixed salary but you earn 1% of everything else that comes inso if you do 30M in the year you have a very healthy commission.

Once you have figured out what you believe o be a fair proposition- then go directly to your bss and thrash it out with them.

Don't wait for your boss to come up with the proposal because for usre it will be much less than you had hoped and you will then have to negotiate from a position of weakness and you won't win much back :)

Good luck

Matthew